Question
In: Finance
Using the table of probabilities and returns for a stock mutual fund, what is the mutual...
Using the table of probabilities and returns for a stock mutual fund, what is the mutual fund's expected return?
|
State |
Probability |
Return |
|
Depression |
0.05 |
-20% |
|
Recession |
0.25 |
-5% |
|
Normal |
0.5 |
8% |
|
Boom |
0.2 |
30% |
Multiple Choice
-
9.15%
-
10.25%
-
7.75%
-
8.00%
Solutions
Expert Solution
Expected return=Respective return*Respective probability
=(0.05*-20)+(0.25*-5)+(0.5*8)+(0.2*30)
which is equal to
=7.75%
jeff jeffy answered 2 years agoRelated Solutions
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